Netflix and Qwikster

Summary:
Tools
VUCA – in 2011
PESTEL
• Political
o Copyright law changes might affect Netflix ability to distribute this content to
customers which could significantly impact business.
o Netflix in 2011 can benefit from the economic freedom offered by the
democratic governance system, which promotes entrepreneurship and free
trade.
o Netflix in 2011. is present in different countries, each having own political
tensions. Growing tensions and instabilities in the global political environment
can affect the Gold industry growth and limit the growth opportunities
available to Netflix in 2011
• Economic
o Netflix is working in a business that depends mainly on the disposable income
of its clients. If the growth of economic rates were slow and the power of
customers purchasing are negatively impacted, Netflix would feel the impact
of this drop in purchasing power first.
o The rising inflation rate can have a negative impact on the revenue growth of
Netflix in 2011 as its decreases the purchasing power of money and
discourages consumer spending on goods and services.
• Sociocultural
o High population growth and rising proportion of young population segment
are two favourable demographic indicators for Netflix in 2011
• Technological –
o Use of social media has become common in a modern business environment.
Netflix in 2011. can leverage the opportunities offered by social media
marketing to improve business performance. Technological trends can be used
to start the creative social media campaigns for developing online brand
communities.
o Entering in markets where technological advancement has not reached the
maturity means Netflix in 2011
• Environmental
o The environmental standards, laws and regulations vary across different
markets. The international presence of Netflix in 2011. require the
organization to consider these differences to avoid undesired circumstances
carefully.
o Many countries have placed strict norms to protect their urban areas through
effective waste management.
o Some countries offer subsidies for encouraging investment in renewable
technologies. Netflix in 2011. can benefit from it and invest in renewable
technologies to ensure long-term sustainability.
 o Excessive resource depletion by Netflix in 2011. can draw the negative
response from media, environment protection groups, customers and the
general public
• Legal
o Consumers regulation – protect their data
o Copyright and content laws

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Porter +
• Threat of substitute products and services
o If the threat of substitute is high then Netflix Rental has to either continuously
invest into R&D or it risks losing out to disruptors in the industry.
• Bargaining power of suppliers of Netflix Rental
o If suppliers have strong bargaining power then they will extract higher price
from the Netflix Rental.
• Rivalry among existing players
o If competition is intense then it becomes difficult for existing players such as
Netflix Rental to earn sustainable profits.
• Threat of new entrants
o if there is strong threat of new entrants then current players will be willing to
earn less profits to reduce the threats.
• Bargaining power of buyers of Netflix Rental
o If the buyers have strong bargaining power then they usually tend to drive
price down thus limiting the potential of the Netflix Rental to earn sustainable
profits.
• Technology
o Very important role on new products and substitutes, mainly because of their
own projections
• Regulator
• Entry barriers

C1-C4 – levels of competition

Nowadays:

• C1 represents the highest level of competition, first level of competition, fulfils the same needs
and has the same characteristics. Could include HBO, Apple TV, Amazon Prime, Disney+ ;
• C2 addresses firms that compete for the same needs but slightly different or better
characteristics. C2 has companies such as the recent YouTube Premium;
• C3 includes companies that satisfy approximately the same needs but have totally different
characteristics. C3 includes other means of entertainment such as Television, YouTube, Cinema;
• C4 englobes organisations with totally different needs and characteristics, but that are also
considered when taking the decision. C4 addresses other activities that individuals usually do in
their free time, like Sports and Gyms Subscriptions, Subscriptions to Newspapers and
Magazines, Books, Hanging out with family and friends.
Gary Hamel and VRIN

Culture
• No vacation policy (take as much as you want, as long as you're doing a great job and
covering your responsibilities).
• "Outstanding" employees only--doing an "adequate" job leads to your getting a
"generous severance package," so the company can hire an A-player in your place.
• "Freedom and responsibility" vs command-and-control: Good managers give their
employees the right context in which to make decisions--and then the employees
make the decisions.
• No "brilliant jerks" -- Star performers who also happen to be hell to work with are sent
packing.

SWOT - 2011
• Strengths
o Successful Go To Market Track Record – Netflix Rental has a highly successful
track record of both launching new products in the domestic market but also
catering to the various market based on the insights from local consumers.
According to Willy Shih, Stephen P. Kaufman , Netflix Rental has tested various
concepts in different markets and come up with successful Strategy &
Execution solutions.
o Superior product and services quality can help Netflix Rental to further
increase its market share as the current customer are extremely loyal to it.
According to Willy Shih, Stephen P. Kaufman in Netflix in 2011 study – there
are enough evidences that with such a high quality of products and services,
Netflix Rental can compete with other global players in international market.
o Managing Regulations and Business Environment – Netflix Rental operates in
an environment where it faces numerous regulations and government diktats.
In Disruptive innovation, Growth strategy, Operations management,
Technology areas, the firm needs to navigate environment by building strong
relationship with lobby groups and political network.
o Strong Balance Sheet and Financial Statement of Netflix Rental can help it to
invest in new and diverse projects that can further diversify the revenue
stream and increase Return on Sales (RoS) & other metrics.
o Diverse Product Portfolio of Netflix Rental – The products and brand portfolio
of Netflix Rental is enabling it to target various segments in the domestic
market at the same time. This has enabled Netflix Rental to build diverse
revenue source and profit mix.
o Intellectual Property Rights – Netflix Rental has garnered a wide array of
patents and copyrights through innovation and buying those rights from the
creators. This can help Netflix Rental in thwarting the challenges of
competitors in various industries Disruptive innovation, Growth strategy,
Operations management, Technology.
o First Mover Advantage – Netflix Rental has first mover advantage in number of
segments. It has experimented in various areas Disruptive innovation, Growth
 strategy, Operations management, Technology. The Strategy & Execution
solutions & strategies has helped Netflix Rental in coming up with unique
solution to tap the un-catered markets.
• Wekenesses
o Project Management is too focused on internal delivery rather than
considering all the interests of external stakeholders. This approach can lead
to poor public relation and customer backlash.
o Organization Culture – It seems that organization culture of Netflix Rental is
still dominated by turf wars within various divisions, leading to managers
keeping information close to their chests. According to Willy Shih, Stephen P.
Kaufman of Netflix in 2011 case study, this can lead to serious road blocks in
future growth as information in silos can result can lead to missed
opportunities in market place.
o Netflix Rental business model can be easily replicated even with the number of
patents and copyrights the company possess. The intellectual property rights
are very difficult to implement in the industry that Netflix Rental operates in.
According to Willy Shih, Stephen P. Kaufman , Intellectual Property Rights are
effective in thwarting same size competition but it is difficult to stop start ups
disrupting markets at various other levels.
o Lack of critical talent – I believe that Netflix Rental is suffering from lack of
critical talent especially in the field of technology & digital transformation.
Netflix Rental is struggling to restructure processes in light of developments in
the field of Artificial Intelligence (AI) and machine learning.
o Lack of Work force diversity – I believe that Netflix Rental is not diverse
enough given that most of its growth so far is in its domestic market.
According to Willy Shih, Stephen P. Kaufman , this can reduce the potential of
success of Netflix Rental in the international market.
o Customer Dissatisfaction – Even though the demand for products have not
gone down but there is a simmering sense of dissatisfaction among the
customers of Netflix Rental . It is reflected on the reviews on various on-line
platforms. Netflix Rental should focus on areas where it can improve the
customer purchase and post purchase experience.
• Opportunities
o E-Commerce and Social Media Oriented Business Models – E-commerce
business model can help Netflix Rental to tie up with local suppliers and
logistics provider in international market. Social media growth can help
Netflix Rental to reduce the cost of entering new market and reaching to
customers at a significantly lower marketing budget. It can also lead to
crowd sourcing various services and consumer oriented marketing based
on the data and purchase behavior.
o Increasing Standardization – Netflix Rental can leverage this trend to
reduce the number of offerings in the market and focus the marketing
efforts on only the most successful products.
o Changing Technology Landscape – Machine learning and Artificial
Intelligence boom is transforming the technology landscape that Netflix
Rental operates in. According to Willy Shih, Stephen P. Kaufman , Netflix
Rental can use these developments in improving efficiencies, lowering
costs, and transforming processes.
 o Reducing Cost of Market Entry and Marketing into International Markets –
According to Willy Shih, Stephen P. Kaufman, globalization along with
boom in digital marketing and social media has considerably reduced the
risks of market entry and marketing in international market.
o Opportunities in Adjacent Markets – Netflix Rental can explore adjacent
industries Disruptive innovation, Growth strategy, Operations
management, Technology to further market growth especially by
extending the features of present products and services.
o Lucrative Opportunities in International Markets – Globalization has led to
opportunities in the international market. Netflix Rental is in prime
position to tap on those opportunities and grow the market share.
According to Willy Shih, Stephen P. Kaufman , growth in international
market can also help Netflix Rental to diversify the risk as it will be less
dependent on the domestic market for revenue.
• Threats
o Growing Protectionism - Netflix Rental should hedge the risk against growing
protectionism ranging from – storing data into international market to
diversifying risk by operating into countries at different economic cycle.
o Increasing bargaining power of buyers – Over the years the bargaining power
of customers of Netflix Rental has increased significantly that is putting
downward pressure on prices. The company can pursue horizontal integration
to consolidate and bring efficiencies but I believe it will be a short term relief.
According to Willy Shih, Stephen P. Kaufman , Netflix Rental needs
fundamental changes to business model rather than cosmetic changes.
o Squeezing Middle Class in Developed and Developing World – The growing
inequality is one of the biggest threat to not only globalization but also to
capitalism. Netflix Rental first hand witnessed the impact of it where it has
seen lower demand of its products from middle class customers in US and EU
market.
o Credit Binge post 2008 Recession – Easy access to credit can be over any time,
so Netflix Rental should focus on reducing its dependence on debt to expand.
The party has lasted for more than a decade and rollback from Fed can result
in huge interest costs for Netflix Rental.
o Increasing costs component for working in developed market because of
environmental regulations – Netflix Rental has to deal with these costs as
governments are trying to levy higher environmental taxes to promote cleaner
options. For Netflix Rental it may result into higher logistics costs and higher
packaging costs.
o International Geo-Political Factors – Since the Trump election, geo-political
factors have taken a turn for growing protectionism. Developments such as
Brexit, Russian sanctions, foreign exchange crisis & inflation in Venezuela,
lower oil prices etc are impacting international business environment. Netflix
Rental should closely focus on these events and make them integral to
strategy making.

Vision
• Becoming the best global entertainment distribution service.
• Licensing entertainment content around the world.
 • Creating markets that are accessible to filmmakers.
• Helping content creators around the world to find a global audience.

Mission
Our success is built on providing the most expansive selection of DVDs; an easy way to choose
movies; and fast, free delivery

Ansoff Matrix
Regarding Ansoff Matrix, Netflix is making a product development – Innovation

Innovation curves
As the market has already competitors entering, is has reached the PoNR. The early majority is
entering. They should invest on the streaming.

Horizons – 2
We can say Netflix was investing on it second horizon, developing streaming.

BCG – star
Regarding BCG, the innovation can be considered a question mark or a star once they have the
first movers advantages.